TeleNav 2014 Annual Report Download - page 66

Table of Contents
fair value of these indemnification agreements is minimal. We have not recorded any liabilities for these agreements as of June 30, 2014 .
Off-balance sheet arrangements
During fiscal 2014 , 2013 and 2012 , we did not have any relationships with unconsolidated entities or financial partnerships, such as
structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes.
Recent accounting pronouncements
In June 2013, the FASB ratified Emerging Issues Task Force (EITF) Issue 13-C, “Presentation of an Unrecognized Tax Benefit When a
Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
” which concludes an unrecognized tax benefit
should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax law. We will adopt this
amendment beginning July 1, 2014. The result of adoption may be to reclassify certain long term liabilities for uncertain income tax positions to
reduce the carrying value of long term deferred tax assets. However, the adoption is not expected to result in a material change to the tax
provision. We do not believe that the impact on our consolidated financial statements will be significant.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" (ASU No. 2014-
09), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to
customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits
the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The updated standard becomes
effective for us in the first quarter of fiscal 2018. We have not yet selected a transition method and we are currently evaluating the effect that the
updated standard will have on our consolidated financial statements and related disclosures.
Interest rate sensitivity . The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize
income without significantly increasing risk. By policy, we do not enter into investments for trading or speculative purposes. Some of the
securities we invest in are subject to market risk. This means that a change in prevailing interest rates may cause the fair value of the investment
to fluctuate. To minimize this risk, we invest in a variety of securities, which primarily consist of money market funds, commercial paper,
municipal securities and other debt securities of domestic corporations. Due to the nature of these investments and relatively short duration of the
underlying securities, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of
changes in interest rates. Declines in interest rates, however, will reduce future interest income. A 10% appreciation or depreciation in interest
rates in fiscal 2014 would not have had a material impact on our interest income or the fair value of our marketable securities.
Foreign currency risk . A substantial majority of our revenue has been generated to date from our end users in the United States and, as
such, our revenue has not been substantially exposed to fluctuations in currency exchange rates. However, some of our contracts with our
customers outside of the United States are denominated in currencies other than the U.S. dollar and therefore expose us to foreign currency risk.
Should the revenue generated outside of the United States grow in absolute amounts and as a percentage of our revenue, we will increasingly be
exposed to foreign currency exchange risks. In addition, a portion of our operating expenses are incurred outside the United States, are
denominated in foreign currencies and are subject to changes in foreign currency exchange rates, particularly the Chinese Renminbi, or RMB,
and the Romanian Leu. Additionally, changes in foreign currency exchange rates may cause us to recognize transaction gains and losses in our
statement of operations. An immediate 10% adverse change in exchange rates on foreign denominated receivables and payables as of June 30,
2014 would not have resulted in a material loss.
To date, we have not used any foreign currency forward contracts or similar instruments to attempt to mitigate our exposure to changes in
foreign currency rates.
The response to this item is submitted as a separate section of this Form 10-K. See Part IV, Item 15.
56
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA